Correlation Between Enerpac Tool and Power Solutions

Can any of the company-specific risk be diversified away by investing in both Enerpac Tool and Power Solutions at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Enerpac Tool and Power Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enerpac Tool Group and Power Solutions International,, you can compare the effects of market volatilities on Enerpac Tool and Power Solutions and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Enerpac Tool with a short position of Power Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enerpac Tool and Power Solutions.

Diversification Opportunities for Enerpac Tool and Power Solutions

-0.09

Correlation Coefficient

Enerpac Tool  Power Solutions

Good diversification

The 3 months correlation between Enerpac and Power is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Enerpac Tool Group and Power Solutions International, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Solutions Inte and Enerpac Tool is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Enerpac Tool Group are associated (or correlated) with Power Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Solutions Inte has no effect on the direction of Enerpac Tool i.e., Enerpac Tool and Power Solutions go up and down completely randomly.

Pair Corralation between Enerpac Tool and Power Solutions

Given the investment horizon of 90 days Enerpac Tool is expected to generate 5.75 times less return on investment than Power Solutions. But when comparing it to its historical volatility, Enerpac Tool Group is 3.79 times less risky than Power Solutions. It trades about 0.07 of its potential returns per unit of risk. Power Solutions International, is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  280.00  in Power Solutions International, on October 21, 2024 and sell it today you would earn a total of  3,225  from holding Power Solutions International, or generate 1151.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Enerpac Tool Group  vs.  Power Solutions International,

Enerpac Tool Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enerpac Tool Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Enerpac Tool is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Power Solutions Inte

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power Solutions International, are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, Power Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enerpac Tool and Power Solutions

The main advantage of trading using opposite Enerpac Tool and Power Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enerpac Tool position performs unexpectedly, Power Solutions can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Power Solutions will offset losses from the drop in Power Solutions' long position.

The idea behind Enerpac Tool Group and Power Solutions International, pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.